Sovereign wealth funds to plump Gulf Arabs' financial muscle

Gulf Arab emirates' dissatisfaction with the international crude prices could upset taxi drivers in downtown New York city as their daily income would shrink from a hike in oil prices.

In addition, these desert states' financial weight in the western market could not be downplayed in the years to come as they are home to several top sovereign wealth funds grown from steady oil and gas revenues.

BORN FROM OIL REVENUES

The Gulf Cooperation Council (GCC) groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). The six states sit atop around 45 percent of the global oil reserves and 16 million barrels of crude are shipped from this region per day.

To reduce reliance on non-renewable resources and diversify their economy, the six countries allocated part of the oil income to establish the sovereign wealth funds as pools of money for overseas investment.

In UAE, the Abu Dhabi Investment Authority is now the world's largest sovereign wealth fund, with assets of around 627 billion U. S. dollars.

Saudi Arabia's sovereign wealth fund that operates 415 billion dollars ranks third, and was closely followed by Kuwait Investment Authority (8th) and Qatar Investment Authority (13th), according to the latest data from the Sovereign Wealth Fund Institute.

The Kuwait Investment Authority boasts the world's oldest sovereign wealth fund, dated back to 1953. In Kuwait, 10 percent of annual revenues are transferred into the country's sovereign wealth fund, whose assets are currently estimated at more than 200 billion dollars.

PROFITABLE OVERSEAS INVESTMENT

In the past few years, these Gulf sovereign wealth funds have increased their presence in the western financial and real estate markets.

They have also become sources of capital for companies around the world to boost capital flow amid the international financial crisis.

In 2008, Britain's Barclays Plc sold 8.7 billion of stocks and convertible notes to sovereign wealth funds in Qatar and Abu Dhabi to avoid being bailed out by the government.

Those investments in turn were profitable for these oil- exporters. Qatar Holding, a branch of the Qatar Investment Authority, pocketed 1 billion dollars in profit after selling shares in Barclays Plc, a year after it extended help to Britain's second-largest bank.

Kuwait also gained a profit of 1.1 billion dollars last year by selling its stake in the Citigroup, after offering a hand when the group was in an urgent need for cash.

In a recent development, beleaguered British Petroleum Corporation's Chief Executive Officer Tony Hayward visited Abu Dhabi to seek a rise in stakes from the emirate as costs to clean up the Gulf of Mexico oil spill have been mounting.

Among the six sovereign wealth funds, the Qatar Investment Authority was the most active and high-profile in the past year, with 14 publicly investments valued at more than 32 billion dollars.

In May, Qatar Holding bought the famed British Harrods department store in the most eye-catching acquisition this year. The world's top liquified natural gas (LNG) exporter is expected to become the top global overseas investor this year.

"The sovereign wealth funds in the Gulf region have gained much experience in their overseas investment, and they possess the ability to maintain this momentum in the years to come," said Hu Yaowu, commercial counselor at the Chinese embassy in Kuwait.

Source:Xinhua